Alstrin v. St. Paul Mercury Insurance Company

J. Christopher Alstrin, Melvin Pearl, Jeffrey Taylor, Bruce Taylor, and Sidney Taylor (plaintiffs) were former officers and directors of the Cole Taylor Financial Group, Inc. (Cole). The plaintiffs were defendants in a securities class-action lawsuit and adversary proceedings asserting claims for fraudulent conveyance and breach of fiduciary duty brought by Cole’s bankruptcy estate representative. Cole had a directors and officers (D&O) liability insurance policy with National Union (defendant) that covered loss arising from a claim. The term “claim” was defined under the policy as “a civil, criminal, or administrative proceeding for monetary or on monetary relief.” The policy also covered a “Securities Claim,” which was defined in part as a claim that “alleges a violation of the Securities Act of 1933 or the Securities Exchange Act of 1934 . . . which alleges a Wrongful Act in connection with the claimant’s purchase or sale” of company securities. “Wrongful Act” was defined as “any breach of duty, neglect, error, misstatement, misleading statement, omission, or act by the Directors and Officers of the Company in their respective capacities as such . . . .” The policy also contained three exclusions. Exclusion 4(c) excluded claims arising from “the committing in fact of any criminal or deliberate fraud.” Exclusion 4(a) excluded claims arising from “the gaining in fact of any profit or advantage to which an insured was not legally entitled.” Exclusion 4(i) excluded claims “brought by any Insured or by the Company . . . .” The plaintiffs brought a coverage dispute, seeking coverage from National Union under the D&O Policy the securities class-action lawsuit and estate representative’s adversary proceedings. The plaintiffs moved for summary judgment, claiming that the exclusions did not apply to their claims and that National Union’s interpretation of the exclusions would negate the coverage under the policy.